RBI’s FCNR(B) scheme draws $100 billion, pushes forex reserves to record high
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The Reserve Bank of India’s (RBI) special scheme to attract foreign currency deposits from non-resident Indians (NRIs) has drawn more than $100 billion, significantly exceeding expectations and helping push India’s foreign exchange reserves to a record $729.3 billion.
The Foreign Currency Non-Resident (Bank), or FCNR(B), scheme was launched in June with the RBI expecting to attract around $80 billion. Inflows crossed the $100-billion mark by August 31, according to The Financial Express, citing official sources.
The RBI closed the FCNR(B) window on Monday, a month before its original September 30 deadline, due to concerns over risks from a potential reversal of excessive inflows. Banks can continue to use the swap facility for deposits already contracted until September 11.
Under FCNR(B), NRIs can deposit overseas earnings in foreign currencies such as US dollars without converting them into rupees. The deposits are held for a fixed term, with both principal and interest paid in foreign currency, shielding depositors from exchange-rate fluctuations.
The RBI introduced a concessional swap facility in June to make three-to-five-year FCNR(B) deposits more attractive. The facility effectively absorbed forex hedging costs normally borne by banks.
The scheme was introduced after FCNR(B) inflows fell sharply, from more than $7 billion in FY25 to $946 million in FY26. In early August, the RBI said $40.8 billion had entered the country through the scheme since June.
The latest inflows have strengthened India’s external buffer at a time of elevated oil prices and geopolitical tensions. Forex reserves stood at $682 billion on July 24 before rising to $729.3 billion as of August 21, Reuters reported.
The additional reserves have also given the RBI greater room to intervene in currency markets. The rupee gained 0.4 per cent on Tuesday to 94.7988 against the US dollar, its strongest level since July 1, according to Bloomberg.
The RBI has previously turned to diaspora deposits during periods of external pressure. In 1991, such measures were used during India’s balance-of-payments crisis, while a similar programme raised about $34 billion in 2013 during the US Federal Reserve’s “taper tantrum.”